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Worksheet 1 - Worksheet 1 Global Economy Tucker Hudson 1 a...

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Worksheet 1 Global Economy Tucker Hudson 1 a. If the experts are right and investor could make the most return if they exchanged the money using the foreword market. This is because the interest rate in Japan will increase from 2.5% to 3% within one year. This would give them 103yen versus the original 100. b. The exchange rate in one year should equal to 103yen per dollar. 2 a. Yes interest rate parity holds. This is because as the interest rate goes up in the US and the foreword market exchange rate will go down. b. 3 a. Mercantilists say that the economy was a zero sum game, no net positive gain. The goal of the Mercantilists was to maximize wealth by giving rise to trade restrictions and promoting exports. b. Adam smith says that the market will work itself, and everything is driven buy and invisible hand. c. Well the mercantilists promoted trade tariffs, because they wanted to maximize their wealth within there country. As for Adam Smith his views on trade are that it should be free, and everyone should practice free trade. Those who do not practice then, retaliatory
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